The times interest earned ratio reflects

PART 3, RATIO ANALYSIS:

(1) LIQUIDITY:

FY 2018 FY 2017

Current Ratio:

Company

2018

2017

Home Depot

1.16

1.25

Arc Hardware

0.98

1.04

Quick Ratio:

Company

2018

2017

Home Depot

0.86

0.98

Arc Hardware

0.65

0.78

Comments On The Company’s Liquidity:

Be sure to include comments! The numbers are meaningless by themselves. Comment

on what you see. What story do the numbers tell?

The liquidity reflects the ability of business to pay off its short term obligations. The liquidity position of home Depot is a more efficient and strong in contrast to its competitor Arc Hardware liquidity position. The liquidity position of both the businesses is satisfying but the extent of strength is higher in home depot in contrast to Arc Hardware.

(2) ASSET MANAGEMENT

FY 2018 FY 2017

Total Asset Turnover:

Company

2018

2017

Home Depot

2.26

2.20

Arc Hardware

2.198

2.23

Average Collection Period:

Company

2018

2017

Home Depot

45 days

47 days

Arc Hardware

40 days

35 days

Comments On The Company’s Asset Management:

The asset management ratio reflect the ability of the business management to use assets of the business for generation of business sale volume. Both companies hold positive and satisfactory trends in terms of assets turnover ratio. But the home depot hold an increasing trend from year 2017 to 2018 in contrast to Arc Hardware in which the asset turnover ratio reduce from 2017 to 2018. This reflect that in year 2018, Home Depot use its assets in a more rational and effective way for generation of sale. The average collection period reflect after how many days collection is received from debtors. Home depot holds an average collection period up to an optimal level to avoid bad debts and to keep the credit sale volume satisfactory. But, in ARC Hardware, the average collection period expand rapidly from financial year 2017 to 2018 which reflect an increase in business bad debt volume.

(3) DEBT MANAGEMENT:

FY 2018 FY 2017

Total Debt to Total Assets:

Company

2018

2017

Home Depot

0.97

0.86

Arc Hardware

0.62

0.65

Times Interest Earned:

Company

2018

2017

Home Depot

14 times

13 times

Arc Hardware

8 times

8.5times

Comments On The Company’s Debt Management:

The debt management ratio in both the companies is also satisfactory but hold more efficient and persistent increasing trend in both financial year in Home Depot. The total debt to total asset ratio of Home Depot is more satisfying and reflect the large amount of assets of businesses are not depend upon the debt obtained by the business. Beside this, the time interest earned ratio reflect the ability to pay off its interest expense out of its profit volume . Home depot can pay its interest 13 times out of its operating profit while this ability of ARC Hardware is only 9 times. This reflect presence of large debt volume in arc hardware in contrast to Home depot.

(4) PROFITABILITY:

FY 2018 FY 2017

Net profit Margin:

Company

2018

2017

Home Depot

8.55

8.41

Arc Hardware

5.78

6.2

Return on Assets:

Company

2018

2017

Home Depot

19.3

18.5

Arc Hardware

9.65

10.4

Return on Equity:

Company

2018

2017

Home Depot

593.5

183.6

Arc Hardware

25.64

32.45

Comments On The Company’s Profitability:

The profitability ratios of home depot are more satisfactory and attractive in contrast to Arc Hardware. It reflects that Financial performance in terms of earning profit is more appealing and attractive in Home Depot in contrast to others.

(5) MARKET VALUE RATIOS:

FY 2018 FY 2017

PE Ratio:

Company

2018

2017

Home Depot

19.09

20.39

Arc Hardware

16.67

13.24

Market to Book Ratio:

Company

2018

2017

Home Depot

149.83

36.52

Arc Hardware

5.45

7.34

Comments On The Company’s Market Value Ratios:

The market value ratio of Home Depot is less satisfactory in contrast to Arc Hardware.

PART 4, CONCLUSIONS AND RECOMMENDATIONS

- Summarize your analysis. Review your comments in the financial analysis section and provide your assessment of the overall status of the firm. Include any recommendations you think are appropriate.

The financial performance of Home Depot is more satisfying and strong with presence of positive trends with persistency. The positive trends indicate that investment in Home depot is quite favorable and can bring high returns towards investors in contrast to ARC Hardware which hold a relatively less satisfactory and less increasing trends in its financial performance from year 2017 to 2018.

- List any other recommendations you have for the firm in view of your analysis.

Home Depot should take extensive attention to improve its market value and share price level to strengthen its share price market value.